Swedish equipment vendor Ericsson saw declining profits for its fourth quarter and will lay off 5,000 employees in a continuing effort to cut costs, the company said Wednesday.

The company plans to achieve annual savings of 10 billion Swedish kronor (US$1.2 billion) from the second half of next year through the job cuts.

Around 1,000 people will be laid off in the Stockholm area. Ericsson will also reduce the number of consultants and other temporary staff, it said in a statement.

Ericsson has to be prepared for tougher times and do everything it can to defend its current market position, according to CEO Carl-Henric Svanberg. Ericsson warned that it's difficult to predict to what extent consumer spending on telecom services will be affected in the future.

Ericsson said its core infrastructure business has hardly been hit by the recession so far, but the company did see declining profits. Sales for 2008, however, were up compared to a year prior.

The company made a net profit of 3.9 billion kronor during the fourth quarter, compared to 5.6 billion kronor during the same period in 2007. Full-year profits came in at 11.3 billion kronor, down from a net profit of 21.8 billion in 2007.

At the same time, sales during the fourth increased by 23 percent to 67 billion Swedish kronor compared to a year earlier. Sales for 2008 came to 208.9 billion kronor, 11 percent higher than 2007.

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